2b Reversal in BABA

[Steven Place]

This is a “failed breakout” setup in BABA.

IF BABA breaches today’s low, buy the Dec 120 put, probably for about 7 bucks.

Place your stop at 120.55, which is a few points above today’s HOD.

IF BABA doesn’t breach today’s low then this is a no trade.

Assuming a buy at 7 bucks and a stop at 120.55, that is a risk of about -105 per option. If you get a profit of 105 per option, take half the position off.

[Steven Place]

Getting ready to sell 1/2 position at 7.80

[Steven Place]

Going to SPREAD the puts to reduce risk.

SELL TO OPEN Dec 105 put for 2.10

This will cut our delta from -61 per contract to -38 per contract. It will also significantly reduce theta risk while still keeping us in the trade.

[Steven Place]

Time to bail on this trade, it’s seen a nice selloff but it’s BABA and all it takes is one upgrade to see a hard reversal and squeeze higher.

Either trail a stop at 112.40, or close the trade outright here:

Sell to close Dec 120 put for 11.00

Buy to close Dec 105 put for 2.45

[Author]

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